India: Actions have consequences

The administration, Congress, and the business community are united in their concern about India’s unfair actions—and in their call for India to reverse course.

More than 220 Members of Congress from both parties in the House and Senate sent that message in letters to President Obama and Secretary of State John Kerry. Secretary Kerry and U.S. Trade Representative Michael Froman also voiced the same concern to senior Indian leaders in Delhi and Washington just days ago.

The remarkable unity on this issue arises from India’s blatant, unfair and wide-ranging industrial policy that is designed to benefit its own well-connected corporations at the expense of manufacturing jobs and innovative and creative industries in the United States.

Taking a page out of the “state capitalist” playbook, the Indian government has dictated that anywhere from 30 percent to 100 percent of its market for certain information technology and clean energy equipment must be satisfied by domestic-based firms. India is discriminating in its taxation of foreign companies and through limits on foreign investment in key sectors.

India’s actions are completely at odds with recognized global norms, and are even out of step with its BRIC – that’s Brazil, Russia, India and China – counterparts. They raise troubling questions about India’s compliance with its international obligations to protect ideas, brands and inventions and to treat imported goods no less favorably than domestic products.

This isn’t just in America’s interest—India is missing opportunity after opportunity to grow into becoming a major player in the global economy. If these actions are allowed to continue, they will sacrifice jobs and threaten India’s ability to grow a forward-leaning economy, as well as stifle new opportunities for its people.

India’s slowing economic growth and disappointing performance in attracting foreign investment are partly the fruits of these policies. India’s own manufacturing policy indicates that these discriminatory actions are likely to expand to other products and sectors. Other countries are noting India’s actions and contemplating their own unfair policies.

A few developments point in the right direction. The Indian government announced recently it will review a policy that would mandate local production of information technology equipment, change its discriminatory tax rules and open up a few areas of its economy to investment.

But these announcements fall far short of solving the specific problems they were intended to address. They do nothing to tackle other challenges. Although a few positive steps have been taken, India is imposing new discriminatory measures in other areas.

India’s disregard for global rules and norms is no way for a rising middle-income country and G20 member with significant international commercial interests of its own to treat a leading trading partner. According to the World Bank, India boasts the world’s third largest economy with a $4.8 trillion annual GDP—larger than all other economies but those of the U.S. and China.

It is high time the Indian government took action to reverse discrimination against industries and manufacturers in the United States. As Vice President Biden heads to India next week, we hope to see India announce comprehensive and concrete actions to remedy this broad set of issues fully.

If India takes real, positive action on the broad issues that have undermined the U.S.-India commercial relationship—from forced localization rules and intellectual property theft to access barriers and other discriminatory policies—we stand ready to work with India to help promote policies that will advance its economy and ensure stronger U.S.-India trade and investment relations.

But if India does not act definitively and broadly, we hope Congress and the Obama Administration will respond swiftly and forcefully, using all available trade tools and diplomatic leverage. India must know its actions come with real consequences.

Dempsey is the National Association of Manufacturers' vice president of international economic affairs. Elliot is executive vice president of the Global Intellectual Property Center at the U.S. Chamber of Commerce. NAM and GIPC serve as co-chairs of the Alliance for Fair Trade with India (AFTI).